Slide strategic core concept and analytical approach 5e by thomson chapter12

 Each firm has a unique culture that is a product of:► The core values and business principles articulated by executives ► Its standards of what is ethically acceptable and what is not

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Strategy – Core Concepts and Analytic

An e-book published and distributed

by McGraw Hill Education, Burr Ridge, Illinois

An e-book published and distributed

by McGraw Hill Education, Burr Ridge, Illinois

Arthur A Thompson The University of Alabama

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“The biggest levers you’ve got to

change a company are strategy,

structure, and culture If I could

pick two, I’d pick strategy and

culture.”

Wayne Leonard

Former CEO, Entergy

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Sun Ziancient Chinese general and philosopher

“Weak leadership can wreck the

soundest strategy; forceful execution of even a poor plan can often bring victory.”

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“Leadership is accomplishing something

through other people that wouldn’t have

happened if you weren’t there… Leadership is being able to mobilize ideas and values that

energize other people… Leaders develop a

story line that engages other people.”

Noel Tichy,

professor and consultant

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“You’ve got to have a vision You’ve got

to have a plan to implement it Then

you’ve got to set the example, develop

the principles and values that are

important, and get people to buy into

it.”

Nick Saban,

Head Football Coach, The University of Alabama

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1 Be able to identify the key features of a company’s

corporate culture and appreciate the role of a company’s core values and ethical standards in shaping the corporate culture.

2 Understand how and why a company’s culture can aid or

block the drive for good strategy execution and operating excellence.

3 Learn the kinds of actions management can take to

change a problem corporate culture.

4 Understand what constitutes effective managerial

leadership in achieving superior strategy execution and

operating excellence.

Chapter 12 Learning Objectives

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 Instilling a Corporate Culture that Promotes Good Strategy Execution

► Identifying the Key Features of a Corporate Culture

► Cultures Are Often Grounded in Core Value and Ethics

► Strong vs Weak Cultures

► Why Cultures Matter to the Strategy Execution Process

► Healthy Cultures That Aid Good Strategy Execution

► Unhealthy Cultures Impede Good Strategy Execution

► Changing a Problem Culture

 Leading the Strategy Execution Process

Chapter 12 Roadmap

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 Each firm has a unique culture that is a product of:

► The core values and business principles articulated by executives

► Its standards of what is ethically acceptable and what is not

► The ingrained work practices, beliefs, and behaviors that define “how we do

things around here”

► Its approach to people management and its style of operating

► The “chemistry” and the “personality” that permeates its work environment

► Stories told repeatedly to reinforce its values, business practices, and

traditions

 The specific cultural traits that emerge from a firm’s meshing of these

culture-determining factors define its corporate culture

► A firm’s culture is its psyche or organizational DNA

► A firm’s culture is important because it influences its actions and approaches

to conducting its business

Instilling a Corporate Culture That Promotes

Good Strategy Execution

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Core Concept

Corporate culture refers to the character of a

firm’s internal work climate and psyche—as

shaped by its core values, business principles,

ethical standards, ingrained beliefs and behaviors, approach to people management, style of

operating, and traditions.

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Identifying the Key Features of

a Company’s Corporate Culture

Traditions and stories and “how

we do things around here”

How the firm treats its stakeholders

A Company’s Corporate Culture

Atmosphere and spirit that pervades the firm’s work climate

How managers and employees interact and relate to one another

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 The values, beliefs, and practices that undergird a firm’s culture can have any of several origins:

► A founder or strong executive leaders who articulated

them as a set of business principles, the firm’s policies and ways of operating

► Exemplary actions of personnel viewed as role models

► Evolving consensus about “how we ought to do things

around here.”

Over time, these cultural underpinnings take root,

become embedded in how the firm conducts its

business, and gain widespread acceptance among both managers and employees

Identifying the Key Features of a Company’s

Corporate Culture

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 Zealous pursuit of low costs and frugal operating practices

 A strong work ethic

 Ritualistic headquarters meetings to exchange

ideas and review problems

 Executives’ commitment to visiting stores, listening

to customers, and soliciting suggestions from

employees.

Example: Corporate Culture at Wal-Mart

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 Share a common customer-centered goal of

developing the best consumer products that make users feel delight, surprise, and connection to

each Apple device

 Secretive, and highly protective of

company-developed technology and know-how.

 Creative thinking and inspired solutions are

expected from everyone—perfectionists always on the lookout for better ideas.

Example: Cultural Traits at Apple

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 Delivering exceptional service to an

out-of-the-ordinary customer request is a “heroic” act

 Promoting employees noted for their heroic acts

and dedication to outstanding service

 Motivating salespeople with a commission-based compensation system that enables Nordstrom’s

best salespeople to earn more than double what

other stores pay

Example: Cultural Traits at Nordstrom

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 A firm’s corporate culture is strongly influenced by its

dedication to certain core values and the bar it sets for

ethical behavior

► Accounts for why so many firms have developed a formal values

statement and a code of ethics

► At some companies stated values/ethics may be cosmetic, existing mainly to impress outsiders and help create a positive image

 A firm’s stated core values and ethical principles have two culture-building roles:

► Fostering a work climate where personnel share common and

strongly held convictions about how the firm’s business is to be

conducted

► Providing personnel with guidance about the manner in which they are to do their jobs

Cultures Are Often Grounded

in Core Values and Ethics

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FIGURE 12.1 The Two Culture-Building Roles of a Company’s

Core Values and Ethical Standards

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1 Screening and selecting new employees that will mesh well with the culture.

2 Incorporating discussions of the firm’s culture and desired cultural behaviors into

employee orientation programs and training courses for managers and employees.

3 Having senior managers frequently reiterate core values, ethical standards, and the

desired cultural behaviors in daily conversations, at company events, and internal

communications to employees.

4 Stressing that line-managers all the way down to first-level supervisors give ongoing

attention to explaining the desired cultural traits and behaviors in their areas and why they are important.

5 Expecting managers at all levels to be cultural role models and exhibit the advocated cultural norms in their own behavior.

6 Encouraging company personnel to exert strong peer pressure on coworkers to conform

to expected cultural norms.

7 Making the display of cultural norms a factor in evaluating each person’s job

performance, granting compensation increases, and deciding who to promote.

8 Holding periodic ceremonies to honor people who excel in exhibiting and role modeling the desired cultural behaviors.

Ways That Companies Ingrain Cultural

Norms and Perpetuate the Culture

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 Cultures evolve because a variety of factors breed

a new work climate and new ways of doing things:

► Diversification into new businesses

► Expansion into foreign countries

► Rapid growth that brings an influx of new employees

► Merger with or acquisition of another firm

► A new CEO who opts to shake things up

► A significant change in the company’s direction and/or a big strategy change and/or a sudden decline in

sales/profits

The Forces That Cause a Company’s

Culture to Evolve

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Why a Company’s Culture Evolves

A new CEO that

Diversification into new businesses

Expansion into foreign countries

Rapid growth that causes an influx

of new employees

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 It is not unusual for firm to have multiple cultures (or subcultures) with their own values, beliefs, and practices:

members who speak different languages, have grown up under different

customs and traditions, and have different sets of values and beliefs

 Subcultures can clash if:

► They embrace conflicting business philosophies

► Key executives use different approaches to people management

► Differences between a firm’s culture and recently-acquired businesses have not been ironed out

 Existence of subcultures does not preclude important areas of commonality

and compatibility being established in different countries (or within a

subculture)

The Presence of Company Subcultures

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the decisions and

actions taken by all

company personnel.

Weak-Culture Firm

► Lacks values and principles that are consistently preached or widely shared.

► Has few or no shared traditions,

widely-principles, beliefs, values, or behavioral norms.

Strong vs Weak Cultures

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Core Concept

In a strong-culture company, culturally approved

behaviors and ways of doing things flourish, while culturally disapproved behaviors and work

practices get squashed.

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 The dominating presence of deeply-rooted values and operating

approaches “regulate” conduct of a firm’s business and its workplace

 In strong culture firms, senior managers

► Reiterate business principles and core values to organization

members and explain how they relate to its business environment

► Make a conscious effort to display these principles in their own

actions and behavior—they walk the talk

► Insist that those values and business principles are reflected in the decisions and actions taken by all personnel

 Over time, the strong values are widely shared by rank-and-file

employees—people who dislike the culture tend to leave

 Individuals encounter strong peer pressures from co-workers to

observe culturally approved norms and behaviors

Strong-Culture Companies

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 A strong corporate culture has a powerful influence on

strategy execution (“how we do things around here”)

because:

► Many personnel are accepting of cultural traditions

► There are strong management expectations and co-worker peer

pressure to conform to cultural norms

► Managers use traditions, beliefs, values, common bonds, and

behavioral norms as levers to mobilize commitment to executing the chosen strategy

 Caution: Strong cultures can create a HUGE OBSTACLE

to good strategy execution if its behavioral norms conflict with the needed kinds of execution-supportive behaviors.

Strong-Culture Companies (continued)

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 A Weak-Culture Firm

► Lacks values and principles consistently preached or widely shared

► Has few widely revered traditions and evidences few

culture-induced norms in its operating practices

► Lacks top executives committed to culture-building and/or

commitment to particular values and behavioral norms and/or

efforts to paint white lines for actions, decisions, and behavior of

company personnel

► Has a working environment where its personnel feel little co-worker peer pressure to do the right things in particular ways

► Breeds no strong allegiance to what the firm stands for or to

operating the business in well-defined ways

 Cultural weakness can be the result of moderately

entrenched subcultures that block the emergence of a defined work climate

well-Weak-Culture Companies

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 When a firm’s culture promotes attitudes, behaviors, and

ways of doing things conducive to first-rate strategy

execution, the culture

► Functions as a valuable ally in the strategy execution process

► Adds formidable power to management’s strategy execution efforts

 Why so?

► Execution-supportive cultural norms, actions, behaviors, and work practices make it easier for managers to win support for doing the things needed to execute strategy proficiently

► Culture-induced peer pressures steer personnel into actions and

behaviors that aid the cause of good strategy execution

► Execution-supportive cultural influences rally personnel to

implement needed internal changes by exerting their best efforts to attain execution-critical performance

Why Corporate Cultures Matter to the Strategy Execution Process

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Core Concept

A culture that encourages actions, behaviors, and work practices conducive to good strategy

execution adds significantly to the power and

effectiveness of a firm’s strategy execution effort.

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Strategic Insight

In companies with execution-supportive cultural

influences, managers can use the ingrained

values, business principles, behavioral norms,

and established ways of doing things as levers

to mobilize the energy and actions of company

personnel squarely behind the drive for good

strategy execution.

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 A culture that clashes with execution-supportive

behaviors and work practices poses a dilemma for the firm’s personnel:

► Should they be loyal to the culture and traditions of the

firm and resist or be indifferent to behaviors and

practices that promote better strategy execution?

► Should they go along with the strategy execution effort

and engage in actions and behaviors that run counter to the culture?

Why Corporate Cultures Matter to the Strategy

Execution Process (continued)

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Strategic Insight

It is in management’s best interest to dedicate

considerable effort to establishing a corporate

culture that encourages behaviors and work

practices conducive to good strategy

execution and that marshals organizational

energy behind the drive for good strategy

execution.

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 Closely aligning culture with requirements for

strategy execution merits the full attention of senior executives

► Their culture-building objective is to create a work

climate and style of operating that mobilizes their

personnel squarely behind efforts to execute the firm’s

strategy competently.

► The more that execution-supportive ways are embedded

in the culture, the more the culture automatically steers its members toward execution-supportive behaviors and work practices

Why Corporate Cultures Matter to the Strategy

Execution Process (concluded)

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